- Q. Who governs and taxes estates, the federal or the state
government?
A. Currently, there are no Georgia estate taxes, only federal.
However, the laws governing your Will, the probate process of
your estate, and certain other considerations, are regulated by
state law. Federal laws, however, regulate many matters relating
to financial matters and securities, so both state and federal
regulations may apply.
- Q. I want to provide for my surviving spouse and a child
with a disability, for as long as they both live. How can
I do this?
A. There are several ways to do this. You need qualified
professional advice to help you select the best method. If you are
concerned that survivors may not be able to manage the assets
responsibly, you may be advised to establish a trust in your Will.
A professional will manage the assets and provide for the needs
of the survivor for as long as he or she lives, and upon that
person’s death, the funds will go to whomever you specify. This
is a good way to support an organization such as AADD in the
long term, after your family responsibilities are met. Typically, the
trust will support one or more named persons for the rest of their
lives, and only upon their death do the assets go to a charity.
Various devices can be used, such as Charitable Remainder
Unitrusts, Charitable Remainder Annuity Trusts, Qualified
Terminable Interest Property Trust (QTIP), and the like.
Establishing one of these trusts may provide savings both in your
current income taxes and in your estate taxes, as well as making
sure that your estate is managed and distributed according to
your wishes. The term "charitable remainder" simply refers to the
fact that, after the trust has taken care of the persons you
indicate, the remainder goes to a charity. There is no minimum
amount required to establish a trust, but to manage a trust
efficiently often requires a minimum. If you have assets that you
do not currently need, there is also an instrument called a
Charitable Lead Trust, which you can establish now to provide
income to a charity of your choice, and at your death, its assets
go to the person or persons you name. This also may offer
income and estate tax benefits.
- Q. What is the difference between a Unitrust and an Annuity
Trust?
A. Simply stated, the unitrust pays income based on the revenue it
generates, which may fluctuate with the economy; the annuity trust
pays a fixed percentage, regardless of fluctuations in the
economy.
- Q. Can I write my own Will?
A. You can, but it’s a really bad idea, even if you use some of the
forms that are available on the internet. Professional assistance,
practically speaking, is essential, and in the long run, a bargain.
The “do-it-yourself” approach can create a lot of difficulty and
expense for your heirs, and your Will may not even be valid.
Costs may vary among attorneys, but the major factor is the
complexity of your estate. For example, adding a codicil (an
“add-on” or modification) to your Will or writing a new Will may be
quite inexpensive, though complex arrangements may cost
more. You can always call an attorney to get some estimate of
what the costs may be. It is a good idea to work with an attorney
who specializes in this area of law ; a list of members of the
Fiduciary Section of the State Bar of Georgia may be found at:
http://www.gabar.org/sections/section_web_pages/section_members/?id=10
- Q. What is the best way to include AADD in my estate plans?
A. There is no one answer, because what is best for someone else
may not fit your circumstance. After all, it is your wishes and
needs that should be met. For most people, however, the easiest
way to remember AADD is to include it in your Will.
See “Including AADD in your Will”
- Q. Can I leave an amount to support, say, both my church and
AADD, in a Will?
A. Certainly. You can either specify an amount to each, or --perhaps
even easier-- you can spell out exactly what you want to go to
each person you name in your Will (your “legatees"), and then, if
there are any assets left over, you can specify that they go to a
charity such as AADD, or your religious organization, or a
combination of several. You may also name AADD as the
beneficiary of a life insurance policy or a retirement account;
Congress recently has passed legislation that makes gifts of
retirement assets attractive for gifting to charity.
- Q. What happens if I die without a Will?
A. The major issue in dying intestate (pronounced “in-TESS-tate”),
that is, without a valid Will, is that the estate is distributed
according to set rules established by law, which may or may not
be in accordance with your wishes. This can pose many
hardships, as, for example, on a surviving spouse where children
also survive. It also increases costs, and the court will appoint an
administrator –whom you may not even know—who can charge
several percent of the estate’s value for his or her services.
...And although your heirs, your surviving loved ones, can have
input, they do not have control in the matter.
- Q. I do not have a large estate; I have a Will, in which I’m
leaving everything to my spouse. Why should I be
concerned with tax considerations and charitable giving?
A. Estate tax laws may change at any time.* If you have children,
upon your spouse’s death –and depending on the size of his or
her estate—a substantial percentage of the estate could be
subject to taxes. With professional advice, you may be able to
better protect the interests of your family. Plus, a professional
can give you sound advice on possibilities and any tax
benefits of including charitable giving in your plans.
*For example: The maximum Taxable Estate you can have without incurring a
federal estate tax is called the "Exclusion Amount". At present (2006), the
Exclusion Amount for persons dying in 2006, 2007 or 2008 is $2,000,000.
The Exclusion Amount for persons dying in 2009 will be $3,500,000. There
will be no Federal Estate Tax for persons dying in 2010. After 2010, the
Federal Estate Tax is scheduled to be reinstated, with an Exclusion Amount
of $1,000,000; and with tax rates on amounts above that, beginning at 41%,
a significant “tax hit.”
- Q. What about life insurance as an estate planning tool?
A. There are many forms of life insurance. Life insurance can be a
good way of assuring that, in the event of your death, your
survivors will be provided for. Life insurance can also be used to
assure that the full value of your estate passes to your heirs;
this can be done by purchasing a life insurance policy that, upon
your death, will pay the amount needed to pay estate taxes. You
can also use life insurance to provide for a substantial charitable
contribution. You should get objective professional advice
regarding arrangements of this type.
- Q. What about donating stocks or other securities?
A. You can always donate securities to AADD. Contact us for the
transfer information. For tax purposes, your deduction is based
on the value of the stocks at the time you donate them. For
appreciated stocks, you can avoid capital gains tax, as well as
have the tax-deduction for the donation. For stocks that have
depreciated in value, it may be advisable to sell, take a capital
loss, and donate the proceeds.
Please remember that AADD does not give financial, legal, or tax advice.
You should always consult a professional for answers to specific questions.
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